Reach Subsea Delivers Higher Revenue in First Quarter

REACH Subsea has had success in winning new contracts during the quarter and today has an orderbook exceeding NOK 450 million, of which approximately NOK 200 million is related to work for the last three quarters of 2014.

Reach Subsea Delivers Higher Revenue in First Quarter

REACH delivered a strong EBITDA-margin of 14% on revenues of NOK 48 million, in what is typically a seasonally weak quarter for the North Sea subsea industry.

The Company has seen increased tender activity in the quarter and has participated in several short and long term tender processes for work in 2014 and beyond. This is illustrated by high utilisation of both Dina Star and Stril Explorer from mobilization towards the summer season.

REACH will per June 2014 operate three vessels, Normand Reach, Dina Star and Stril Explorer, the latter in close cooperation with the strategic survey partner MMT, Gothenburg.

Operations

REACH started the year with successful offshore operations from Vos Satisfaction in January and February. It provided ROV, associated equipment and personnel for a contract MMT was awarded in the German Continental Shelf.

The Company mobilized Dina Star with Reach WROVs in March 2014 on a contract with Ocean Installer in the UK sector. End client was Total. Prior to mobilization of the Dina Star spread, the vessel owners installed a new AHT 150t crane onboard, thus substantially increasing the capabilities of the vessel for offshore subsea work. The cooperation with vessel owner Myklebusthaug-Group has so far worked according to plan and Reach has secured work for the Dina Star spread into 4th quarter 2014.

REACH also mobilized one Supporter ROV on Stril Explorer, a vessel hired on a time charter contract between partner MMT and Simon Mokster Shipping. During the quarter Stril Explorer completed her first offshore operations on a contract with EMAS on the Troll field.

REACH further completed the refit and upgrade program for the two Supporter ROVs that were purchased in December 2013.

Financials

Revenue for the quarter was NOK 47.9 million compared with NOK 1.2 million for 1Q2013. The increase in turnover compared to 1Q2013 was due to the Group’s growth and start-up of offshore operations.

Operating expense for the quarter was NOK 43.9 million including depreciation. Project-related expense represents the majority of the operating expense for the group. Total operating expense for 1Q2013 was NOK 4 million. The increase in operating expenses from the 1st quarter of 2013 is primarily due to the commencement of offshore operations. The increase is further a consequence of the Group’s growth, which is in line with the development presented in the business plan.

REACH had a net profit of NOK 3.8 million in the period. The EBITDA was NOK 6.9 million, corresponding to an EBITDA-margin of ca 14%. The reported profit is a reflection of good performance on the three contracts REACH executed in the quarter. Personnel was further utilized for maintenance and upgrading of equipment.

REACH’S strategy is to be a full service provider within subsea service. The Group’s management and board have extensive and long experience in the segment. Focus in 2014 will be to further build and increase the backlog, which as of today exceeds NOK 450 million, by bidding for tenders to new and existing clients.

The overall activity in the subsea service market is expected to be high, which should enable the Group to expand its fleet and equipment pool according to the business plan. This expectation is supported by the Group’s tendering activity and prospect list for 2014 and beyond.

Press Release, May 27, 2014